The Ongoing March To Perfect Fairness And Justice

Here in Manhattan it is well known to everybody (with the exception of myself) that perfect fairness and justice between and among all people can easily be achieved by the simple device of the government ordering that it be so.  Housing is scarce and expensive?  Order that it be made "affordable"!  Wages aren't high enough?  Order that they be increased!  Food is too expensive?  Order that it be free or subsidized!

Most of the time the conventional press in New York won't provide any information at all on how these kinds of solutions work out in the real world.  Which makes this past week highly unusual -- on Thursday, the New York Times ran not one but two front page articles that provided some details on two different coercive redistribution schemes in two very different contexts.

First, from Caracas, William Neuman reported on the ongoing disaster in Venezuela.  His article actually provides some real information, mixed in with some of the usual Times spin.  There is a picture of lots of empty shelves in a store, and another one of a huge line of people who have come to get their weekly ration of government-subsidized staples:

The basic take of the article, set out in the headline ("Oil Cash Waning, Venezuelan Shelves Lie Bare"), is that the problems mostly stem from the recent decline in oil prices.  Current strongman Maduro is quoted as attributing the situation to Venezuela's "right wing enemies":

[Maduro] reiterated his position that the country’s economic ills are the fault of an economic war being waged against his government by right-wing enemies.

But Neuman also devotes space to some basic economic sense:

Many economists argue that government policies are a big part of the problem, including a highly overvalued currency, price controls that dissuade manufacturers and farmers, and government restrictions on access to dollars that have led to a steep drop in imports.

There's even a hint that Venezuela's economic problems pre-dated the decline in oil prices:

Even before oil prices tumbled, Venezuela was in the throes of a deep recession, with one of the world’s highest inflation rates and chronic shortages of basic items.

You won't find details in the article of when Venezuela's recession started or how bad it was well before the price of oil started its tumble in July 2014.  For some information on that, try the Manhattan Contrarian from August 2013 here.  Venezuela's official GDP numbers are thoroughly dishonest, but from the combination of falling industrial production, massive inflation, and empty store shelves, it's been obvious that Venezuela's economy has been in serious decline since at least 2012, and probably long before that -- even as the price of oil held between about $90 and $110 per barrel for multiple years from 2011 to 2014.

And finally this on the end game of the perfect-fairness state:

On a recent morning, hundreds of people stood in line outside a big-box store, similar to Costco. Inside, many shelves were stripped clean. The large appliance and electronics section was empty. . . .   Most people came to buy only three items sold at government-mandated prices: laundry detergent, vegetable oil and corn flour.  Every purchase was entered into a database, ensuring that shoppers did not try to buy the same regulated staples at the chain for at least seven days.  Soldiers patrolled the line outside, police officers were stationed inside and government officials checked identification cards, looking for fake ones that could be used to cheat the rationing system.

Well, thank God we have soldiers with guns to be sure that no one gets more than their fair share of vegetable oil!  And how much do you want to bet that those "government officials [who] check identification cards" are the highest paid people in this system?

And then, on the same day, another article about lines:  "Long Lines, and Odds, for New York's Subsidized Housing Lotteries," reported by Mireye Navarro.  Navarro lets us in on how it's going with Mayor de Blasio's efforts to create perfect housing fairness by coercing production of some "affordable" units and then allocating those units by lotteries.  Here's the report on two recent high-profile lotteries:

Last year, a new building in Greenpoint, Brooklyn drew 58,832 lottery applications for 105 affordable units. Not far behind was the Sugar Hill development in Upper Manhattan, which drew more than 48,000 applicants for 98 apartments.

So there were well more than 100,000 applicants for about 200 apartments -- that's a success rate of around 0.2%.  And what happens to the other 99.8%?  They get to spend endless hours filling out forms and standing around in lines.  Here's a picture of people signing up to attend a "workshop" on how to get in on the lotteries:

And even aside from the hopeless shortage of these apartments, somehow perfect fairness keeps eluding us.  Navarro reports that some are complaining because they were excluded from the lotteries for being just above the income cutoffs; others are complaining because their income was below the cutoffs; yet others are complaining because they work multiple and temporary jobs and can't document their income to the penny:

[A]bout three-fourths of the applicants who had been screened were rejected, mostly because their earnings were too low (income requirements ranged from $13,866 to $79,700, depending on the apartment size) or they failed to provide the necessary paperwork. Some missed out by as little as $25 a year, the developer said.  Other applicants had trouble producing tax records or proving their creditworthiness because their employment histories included numerous or short-lived low-paying jobs that are harder to document. And in the months that it took to sort through the candidates, some applicants lost their eligibility because their earnings or family size had changed. (Tenants already moved in are not forced to leave if their circumstances change.)  “Hundreds of people were excluded for reasons that were not rational,” Ellen Baxter, the executive director of the Broadway Housing Communities, said of the city’s lottery rules.

But I thought there were all-knowing, perfectly fair, perfectly neutral bureaucrats who could swoop in and allocate everything with exquisitely perfect fairness.  What am I missing?

Check out some of the many comments to this article.  Lots of them point out the folly of rent regulation, and that we have inflicted expensive housing upon ourselves by one crazy policy after another.  Could it be that New Yorkers are starting to catch on?  It's a small minority, but it seems that some of them read the New York Times.

Where Were Silver's Critics Before Last Week?

Just a week since Sheldon Silver's arrest, and all over the place his former supporters in the media have turned on him.  The New York Times called for Silver's resignation from the Assembly on January 22, the very day the federal criminal charges against him were announced.  The New York Observer called for his resignation on January 27 -- but hey, they're only a weekly paper.  In the blogosphere, the Daily Kos said "Silver Must Go" on January 26.

What I don't understand is where these guys, and lots of others like them, have been for the last twenty years.  The fact is that there's very little really new in the Silver charges other than that Preet Bharara signed his name to them and attached the dubious label of "criminal" to conduct most of which all thinking people long knew was occurring.  Why does the imperative to get rid of Silver somehow turn on Mr. Bharara's now having stated his opinion that Mr. Silver's long-running and well-known conduct fits the amorphous term "deprivation of the intangible right to honest services"?

Let's consider what we knew about Silver's activities prior to January 22, and what inferences would be drawn from that by any reasonable person.  Silver's public disclosure forms are summarized in the criminal complaint against him, available here.  From these disclosure forms alone, we knew that Silver was "of counsel" to a law firm called Weitz & Luxenberg since at least 2002, and that he received gradually increasing amounts of income from that law firm, topping $250,000 per year in 2005 (and every year thereafter), topping $350,000 in 2012, and topping $650,000 in 2013.  From Weitz & Luxenberg's web site, we knew that they are a prominent plaintiff's personal injury law firm mainly specializing in litigation involving asbestos exposure and medical devices.  From the legal press more generally, we knew that W&L in fact has the largest market share in New York among law firms in the asbestos exposure business.

And now for obvious inferences.  Silver was heavily occupied as Speaker of the Assembly and it would not be reasonable to think that he was spending his days interviewing clients, deposing witnesses or arguing in court.  Obviously the income he received from W&L was not based on his own hours doing legal work, but rather on his referrals of clients to the firm.  And why might such clients be referred to the firm through Silver?  Well, Silver had very tight control over a vast state empire of handouts and giveaways to the favored and predation on the disfavored.  Is it really possible that with dozens of clients getting referred to W&L via Silver -- enough clients to generate hundreds of thousands of dollars per year in referral income -- that none of it had anything to do with at least some hope or prospect of favorable treatment from this vast empire?  Of course that was not possible, and of course we knew it.

So where was the New York Times (or any of the other New York left wing press) calling for the ouster of Silver for corruption any time before now or endorsing his opponent in any election?  I sure can't find it.  (There were a few calls for Silver to leave a couple of years ago over an issue of secretly settling charges of sexual misconduct against a member of his staff.)

The fact is that New York's vast empire of state-granted handouts and predation is inherently corrupt and corrupting.  There are many billions of dollars at stake every year in the redistributions that come before the legislature.  In the real estate area alone, the legislature controls the rent regulation regime, which can be altered at any time to take large sums away from real estate investors; that regime is up for renewal later this year.  And then there are the tax breaks (e.g., "421(a)") used to get so-called "affordable housing" built.  Those can be eliminated at any time.  Of course the real estate industry is desperate to do some kind of favors for the pols who pull the strings.  The same goes for the participants in every other area where the government takes from some and gives to others.  For example, don't get me started on the "anti-poverty" scam.

But the reason that the New York Times and the others were not calling for the ouster of Silver is that they basically support the regime of passing out of economic benefits by the state.  They think that government distribution of favors can create perfect social justice and they do not recognize this regime as an inherent source of fundamental corruption.

Getting rid of Silver is not going to fix this problem.  The new person will be just as venal.  Very few people can resist these kinds of temptations.  Nor will criminal prosecution of everyone ever be a solution.  There are plenty of ways to do favors and enrich people that will not be clear "bribes" or "kickbacks" that the criminal law can effectively address.

The only solution is shrinkage of the state redistribution apparatus.  That means electing candidates with a political philosophy the complete opposite of Silver.  Of course, that runs directly contrary to the New York conventional ignorance, which holds that the basic function of government is to take from some and give to others to achieve perfect fairness between and among all people.  Well, you don't get fairness; you get corruption.

If you're wondering where the Manhattan Contrarian was on the subject of Silver before January 22, try here and here.

Is Sheldon Silver A Criminal?

Those of you West of the Hudson may not know the name Sheldon Silver, but as Speaker of the New York State Assembly he is one of the three most powerful men in New York politics (the other two being the Governor and the Majority Leader of the State Senate).  On Thursday Silver was arrested by Federal authorities under the direction of the U.S. Attorney for the Southern District of New York, Preet Bharara.

Before getting to the specifics of the allegations against Silver, I must say that I can't stop thinking about a story that a friend told me a number of years ago.  She stepped out onto the porch of her suburban house and spotted on the front step two different-color snakes coiled around each other.  She was wondering why this would be, when suddenly the two tensed up tightly, and then after some seconds, relaxed again.  And after a little more time, they tensed again, and then again relaxed.  And this behavior was repeated several times.  Gradually, she realized that they were locked in a struggle to the death.   After a while she left, but came back later, to find only one snake where before there had been two -- except that the tail of the second snake was protruding slightly from the mouth of the one that remained.

When it's two serpents, the good thing is that you don't really much care which one wins.

Silver is the complete antithesis of what I would want in a politician.  In his world state politicians exist to pass out favors to special interests, and the special interests then fund the political campaigns to keep the politicians perpetually in power.  Special interest Exhibit A is the teachers union, which according to the New York Post on January 19 spent $4.7 million in 2014 on political contributions (essentially all to Democrats) and lobbying.  Silver is then the key guy for the union in preventing the expansion of charter schools, watering down proposals for teacher evaluations, stopping merit pay, keeping it impossible to fire a teacher, and so on.  For the public employee unions more generally -- who collectively are the dominant political donors in New York -- Silver prevents pension reform, and also undermines employer bargaining power by insuring that pay increases continue even after contracts have expired.  Other major donors include real estate interests and taxi medallion owners who live off state-granted political favors.  It's all completely corrupt and greatly undermines the economic competitiveness of New York.  But none of this is a subject of this new Federal Complaint against Silver.  Also, all this information is well-known, and Silver's constituents keep electing him, most recently with 76% of the vote.

The fact that Silver is completely corrupt does not mean that Bharara has charged him with anything that does or should constitute a crime.   Here's a copy of the prosecutors' Complaint setting out the charges against Silver.  My main take is that there is almost nothing there.

The main charges against Silver are mail and wire fraud under 18 U.S.C. Section 1341, combined with "deprivation of the intangible right to honest services" under 18 U.S.C. 1346.  Section 1341 makes it a crime to engage in "any scheme or artifice to defraud, or for [the] obtaining [of] money or property by means of false or fraudulent pretenses, representations, or promises."  In reading the Silver Complaint, be on the lookout for any of those "fraudulent pretenses, representations, or promises."  You won't find any.   It's not that Silver hasn't made lots of false statements to the public, and this Complaint is full of them.  But if that were a crime every politician would be in jail.  "Fraud" requires not just the false promise but also reliance on it in giving up something of value.  In most to all political corruption cases, the crooked pol hasn't made a false promise to anybody to extract money, and that very issue became a persistent problem for federal prosecutors trying to put away state politicians under the mail and wire fraud statute.  And so Congress in 1988 added the following words in Section 1346:

For the purposes of this chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.

Can you understand what that one means?  Neither can I.  And we're in good company -- neither could the Supreme Court.  In 2010 the conviction of Jeffrey Skilling, one-time CFO of Enron, reached the Supremes.  Now, if ever there was a corrupt guy, he was it.  But he was convicted under this "deprivation of the intangible right to honest services" thing, and on appeal he very appropriately challenged that statute as void for vagueness.  The Supreme Court agreed, and vacated his conviction.  In my view it should have invalidated the statute entirely, but it did not; instead (per Justice Ginsburg) it held:

Construing the honest-services statute to extend beyond that core meaning, we conclude, would encounter a vagueness shoal. We therefore hold that § 1346 covers only bribery and kickback schemes. 

I won't even try to explain to you how Justice Ginsburg was able to discern from the statute that it clearly covered "bribery" and "kickbacks," but was too vague as to everything else, when the statute doesn't ever use the words "bribery" or "kickback" or say anything about those things.  But at least as to everything other than bribery and kickbacks, this was not even close.  The decision was unanimous, 9-0.  Three justices -- Scalia, Thomas and Kennedy -- joined a concurring opinion that said the statute should have been invalidated in its entirety. 

And thus, since 2010, to convict someone of this "deprivation of the intangible right to honest services" thing, the federal prosecutor must prove either "bribery" or a "kickback."

That brings us to the prosecution of Joe Bruno.  Not so long ago -- up to 2008 -- Joe Bruno was the other legislative member (along with Silver and then-Governors Pataki and Spitzer) of the three most powerful men in New York, namely Bruno was the Majority Leader of the State Senate.  That is, he was until he attracted the attention of the federal prosecutors, this time from the Northern District of New York.  And what do you think they charged him with?  You guessed it: "deprivation of the intangible right to honest services."  The basic allegation was that Bruno had gotten paid for "consulting" when he had done little or no work, while the guy paying him had business of some kind before the state.  So what was the "bribery" or "kickback" there?  The prosecutors were completely vague about it, but this was before the Skilling case.  After charges were brought, Bruno retired from the State Senate in 2008.   In 2009 he was convicted on two counts (although acquitted on many others).  While Bruno's case was on appeal, the Skilling case came down from the Supreme Court.  Oops!  In 2011 the Second Circuit reversed Bruno's conviction in light of Skilling.  If the prosecutors had had any decency, they would have walked away at that point; but they don't have any decency.  Bruno was then re-tried in early 2014, but the prosecution now struggled to prove what it was that Bruno had supposedly done as a quid pro quo for his client that made the consulting payment a "bribe."  The jury acquitted Bruno on all charges.  In the final insult in the Bruno case, the Post reported in its Christmas 2014 edition that the State of New York had grudgingly agreed to pay Bruno's legal fees for his completely successful defense.  Yes, that was just a month ago.

OK then, what is the "bribe" or "kickback" that Silver is charged with -- in other words, what is the explicit quid pro quo between Silver and the briber and/or kickback recipient? Given the holding of the Supreme Court in the Skilling case and the extremely recent debacle of the Bruno prosecution, you would think that the prosecutors would know that this point is their Achilles heel and would address the issue squarely and directly in their Complaint.  You would think.

Back to the Federal Complaint.  Starting on page one we find that the prosecutors are savvy enough to use the magic words "bribes" and "kickbacks" in their opening allegations ("SILVER used the power and influence of his official position to obtain for himself millions of dollars in bribes and kickbacks masked as legitimate income").  OK, we can see that at least you have read the Skilling case.  But how about some specifics as to quids and quos?

And then we go all the way to page 17 with lots of allegations obviously designed to paint Silver as a bad man, but only evasiveness as to the quids and quos.  Are you starting to get the sense that they are dodging something? 

• In paragraph 9: "For more than a decade SILVER repeatedly has represented publicly that his outside income as a private lawyer is derived from private citizens who seek him out for legal services in personal injury matters, and that none of his clients has any business before the state."  OK, suppose this is all false.  Why is it a Federal crime?  Where is the bribe or kickback?
• On pages 10 to 13, quoting and flyspecking of Silver's state financial disclosure forms.  He said his income was "predominantly" from a personal injury law firm, but got an eighth or so of it from a real estate law firm!  It's a state crime to make a false statement on one of these disclosure forms!  (OK, but is it a Federal crime?  If not, why are you wasting our time?)
• On page 17, a long list of payments received.  OK, why is it a crime?

Finally, on page 17, paragraph 27:

SILVER . . . obtained approximately $4 million of the income described above in exchange for his corrupt and secret use of his official position through at least two different means and methods: (i) steering real estate developers with significant and continuing business before the State to the Real Estate Law Firm, in exchange to kickbacks paid to him by CC-1 for such referrals, and (ii) soliciting and obtaining referrals to Weitz & Luxenberg from Doctor-1 in return for directing State grants to Doctor-1's research . . . ."

Wait a minute -- payments from people having "business before the state" without any specifics as to a quid pro quo -- wasn't that exactly where the Bruno prosecution foundered?  OK, let's take the two pieces one at a time.     The next seven pages of the Complaint, 17-24, deal with item (i), steering real estate developers to the Real Estate Law Firm.  And for page after page it's all about technicalities of when lawyers can do fee-splitting under the ethical rules and whether Silver complied with all the technicalities -- yes, yet again, it is seven more pages of nothing to do with a Federal crime.  And then finally on page 24, we get to all they've got on the supposed quid pro quo:  "A document . . . from the Moreland Commission, which was prepared by an entity that represents real estate developers, stated in connection with the 2011 rent regulation reauthorization that SILVER was considerably more favorable to the real estate industry than expected. . . .  It would appear that he [Silver] could have successfully pushed for more."

Well, there's a gigantic nothing-burger!  Can't they even name the specific favor that was sought and delivered?  Oh, and did I mention that they conceded back on page 22 that the main entity ("Developer-1") whose real estate business was referred to the "Real Estate Law Firm" only had disclosed to it that Silver was receiving a part of the fees in December 2011 -- several months after the rent regulation reauthorization was complete -- and that that developer was then "concerned and surprised that Silver appeared to have been getting money from Developer-1 through the Real Estate Law Firm."  What exactly kind of "bribe" is that, where the alleged briber doesn't even know that the bribee is getting any money, doesn't find out about it until after the supposed "quo" has been delivered, and is "concerned and surprised" when he finds out? 

And one final thing about this alleged "bribe" from the real estate industry.  Not "successfully pushing for more" in the 2011 rent regulation reauthorization -- if Silver actually did it, which is dubious -- would probably be the only time Silver has ever done the right thing for the bulk of the voters and taxpayers in New York in his entire career.   In this Complaint, doing the right thing by voters and taxpayers is considered payoff for a bribe.

So we turn to item (ii) in paragraph 27 of the Complaint, Silver's relationship with Weitz & Luxenberg.  Over a period exceeding ten years, Silver is alleged to have received several million dollars of fees from W&L, apparently almost entirely based on case referrals from a "Doctor-1," identified as a leading mesothelioma researcher in New York.  The gist of the allegations is that Doctor-1 referred his patients to W&L to bring their cases and in return Silver directed some $500,000 in state money to Doctor-1's mesothelioma institute to support his research.  OK, that's at least a start.  But permit me to mention at least a few issues on the way to trying to prove that this was a bribe:

• There is no mention in the complaint that Silver or anyone on his behalf ever told Doctor-1 that he could get state money for his research if he referred cases to W&L.  Rather, the Complaint states that Doctor-1 first asked Silver if W&L would support his research, and Silver said it would not, and in the face of that Doctor-1 referred cases without any other promise (page 26).  The state money came several years later.
• There is no mention of what portion, if any, of the $500,000 went to Doctor-1 himself.
• After the state funding ended in about 2008, Doctor-1 continued to refer cases to W&L through Silver. 

And I should mention that there appears to be a significant statute of limitations problem in these allegations.  I don't claim to be an expert in criminal statutes of limitations, but the general statute for Federal crimes is 5 years.  So what state benefit has Silver directed to Doctor-1 in the past 5 years?  You need to get all the way to page 29 for that, and it consists of presentation of an award and making a speech praising Doctor-1 for his research, and helping a family member get a job.  Really?

Don't get me wrong -- I think that Sheldon Silver is corrupt through and through and in every pore of his being.  But that doesn't mean that he is guilty of a Federal crime.  Sheldon Silver is just the inevitable product of the New York progressive fantasy.  We concede to the state more and more power supposedly to create perfect fairness by redistribution of economic resources, and what we get is pols who pull the levers of a vast state favor mill to create benefits for the pols' friends and supporters, and those friends and supporters then pass on business opportunities that make the pols rich.  It is not within the possibilities of the criminal law to do away with this. 

And is Preet Bharara any less corrupt?  This is the guy who has convicted dozens of people for the non-crime of non-insider insider trading and engaged in one shakedown after another of the big banks.  Bringing the full resources of the Federal Government to bear to seek to convict someone or coerce a settlement for something that is not a crime -- is that any less evil than what Silver is accused of in this Complaint?  On the same day that Bharara's office arrested Silver, a judge in the Southern District of New York vacated four of Bharara's convictions for non-insider insider trading in light of the Second Circuit's Newman/Chiasson decision.  I'll bet you didn't even notice that one -- it was wiped off the front pages by the Silver arrest.

Can't say I really care which of these two serpents wins.

The "Free Stuff" SOTU

OK, I didn't watch the SOTU.  First of all, every minute would feel like having my teeth drilled.  And second, I was singing in a concert last night.  (Pretty great concert.  Check out the web site of the chorus here.)  But anyway, I've read enough about it to have a good idea what was in there.

At least on the domestic policy front, here's my summary: "I stand for free stuff."  Universal child care!  Paid sick leave!  Paid maternity leave!  Government guaranty of equal pay for women!  Higher minimum wage!  Free community college!  Supposedly this is the plan to "help" the middle class.  And then at the end of the speech:  "surely we can all agree" on these goals.

Do large numbers (let alone a majority) of middle class people actually think that their lives will be improved by getting more and more compulsory free stuff from the government?  I find it hard to believe, and the rapidly increasing numbers of Republican office holders in the era of Obama would seem to validate my skepticism; but I've never seen a poll directly addressing that question.

In my view the idea that lots of free stuff can improve the situation of the middle class is just a simple fallacy.  Sure, the government can make any one person rich by handing out a check, or enough free stuff.  If the government gives you a check for a billion dollars, you are now a billionaire.  That's great for you.  And in a country with over 300 million people, everybody else just lost about $3 each -- they'll never even notice.  So handing out free stuff seems to work great when the stuff only goes to a small number of people.  But the whole thing doesn't hold together when the proposal is that everybody gets the free stuff and everybody has to pay for it, which is what Obama is proposing.  It's not complicated to understand.  Suppose that the government hands out a check for a billion dollars to everybody.  Sorry, but nobody is rich.  In the aggregate we can only consume what we produce.  What they've done instead of making everybody rich is to eliminate the ability of anyone to get ahead through hard work and effort.

Well, at least if they pass out money, you still get to pick what you buy.  When they hand out the stuff, you're stuck with what they decide is good for you.  Community college is not right for you?  Too bad, you must pay for it anyway!  (Remember, close to half the population does not attend any post-secondary education at all, and this is mostly the lower part of the income distribution.  In our tax system these people may pay less than their pro rata share of the taxes, but why again should they pay anything at all for some better off person's higher education?)  If you're in the middle class, the only thing that government's universal distribution of "free stuff" can accomplish for you is gradually to take away your ability to get ahead by hard work.  It's like attaching a ball and chain around your ankle in your race to succeed.

Mitt Romney was far from my favorite as the Republican candidate for President, but he did have a great moment on the "free stuff" issue.  In March 2012 a heckler at a campaign stop asked this question:

 “So you’re all for like, ‘yay, freedom,’ and all this stuff. And ‘yay, like pursuit of happiness.’ You know what would make me happy? Free birth control.”

And Romney replied:

"If you’re looking for free stuff you don’t have to pay for, vote for the other guy. That’s what he’s all about, okay? That’s not, that’s not what I’m about.”

On The Value Of Manhattan Real Estate

The legend is that Manhattan Island was purchased from the Indians in 1626 for $24 worth of trinkets.  The current issue of the New York State Bar Association Journal contains a fascinating article by Paul Otto (unfortunately no link available) giving some detailed history of the transaction.  Was it the best real estate deal of all time?  The story illustrates that different people, for very good reasons, may value the same thing very differently.

Otto points out that the historical letters that are the basis for our knowledge of the purchase mention the value placed by the Dutch on the traded items -- 60 guilders -- but do not mention what the items were.  Thus there is a 1626 letter from one Pieter Schagen, representative of the States General in the West India Company, reporting on the arrival in Amsterdam of a ship from the colony, and stating that the Dutch "have purchased the Island Manhattes from the Indians for the value of 60 guilders"; and a further 1630 letter from West India Company director Johannes de Laet, informing the other directors that there was an island called "Manhattes or Manhatans Island, because this nation of Indians happened to possess the same, and by them it had been sold to the Company."

But even though there is no specific historical reference to the goods traded for Manhattan, Otto points out that there were other, similar transactions at the time, for example one involving what is now Hoboken, New Jersey, and another for Staten Island.  In the case of Staten Island, one document describes the trade goods in question as follows: "Duffles, Kittles, Axes, Hoes, Wampum, Drilling Awls, Jews harps, and diverse other small wares."  Do those seem like "trinkets" to you?  Actually, it is easy to see why the Indians might place tremendous value on these things.  "Duffles" were coarse cloth, which could be used for clothing or blankets; previously the Indians had used deer skins for these purposes.  If you can imagine what it might be like to get through New York winters with nothing but deerskin to cover you, you can see how valuable simple coarse cloth might be.  And then there are axes and hoes.  Before the Europeans came, the Indians had only stone tools.  That means that they had had to build their famous "longhouses" by the backbreaking effort of chopping down trees with only stone axes.  If you have nothing else to do for, say, two weeks, try chopping down a single tree with a stone axe; and you will then understand why the Indians must have viewed metal axes as a godsend.

In fact Otto reports that the European trade goods substantially transformed Indian life, as they stopped trying to be self-sufficient in a hopelessly inefficient stone age economy, and instead devoted their efforts to producing trade goods (largely fur pelts).

Demand for duffels also indicates the Indians' growing dependency upon European goods.  As the Munsees increased the time they spent harvesting furs or producing wampum, they would have less time to produce basic necessities such as clothing, forcing them to acquire these items from the Dutch.

March forward about four centuries to the present, and the value of Manhattan real estate is about as illiquid as ever.  The New York YIMBY ("Yes In My Back Yard") website reports yesterday on the sale of a development site on the North side of Delancey Street for $7.5 million.  The site has a development potential of about 20,000 square feet, so the transaction values the building rights as about $375 per square foot -- and that's with some burden imposed by the so-called "inclusionary zoning" that requires a portion of any apartments built to be "affordable."

But meanwhile, across on the South side of Delancey Street -- where sits the SPURA urban renewal site that has so frequently been a subject of this blog -- the City sold the rights to build 1.9 million square feet for only $180 million.  That's less than $100 per square foot.  But we're getting 500 "affordable" apartments!  Yes, but the difference between $100 psf and $375 psf for 1.9 million square feet is over $500 million -- in other words, over $1 million per "affordable" apartment.  By the way, income limits for the so-called "affordable" apartments are to reach well upwards of $100,000 per year for many of the apartments.

I can understand why the Indians placed such big value on duffles and metal tools.  Why we give up $500 million for a handful of "affordable" apartments when the same people can be housed for a small fraction of the money in a cheaper place -- that I can't understand. 

Economic Insanity Roundup

Here in New York, they distribute the LA-based newspaper called Investors Business Daily, but somehow it doesn't make much of a splash.  Even compared to the Wall Street Journal, IBD does a great job of shining some light on the economic craziness all around us.  Their edition for this holiday weekend has a particularly good collection of underreported stories.

First up, IBD has been doing a great job covering Venezuela, and this weekend's edition has an editorial headed "Venezuela's Socialism Is Falling Apart."   Sample:

As socialism plays out to its logical conclusion in Venezuela, the specters of long lines, rationing, troop enforcers, bizarre edicts and desperate statements are now the order of the day.  Not only have more than a dozen Venezuelans been arrested for posting photographs of empty store shelves on social media, three governors have responded to long lines by — prohibiting them; ordering the arrest of anyone who lines up for goods before sunrise.  Troops now supervise lines because so many fistfights and looting incidents break out in these daily 12-hour ordeals for rice or toilet paper.

Anything about that in the New York Times?  Not that I can find.  A few days ago Venezuela's Catholic bishops issued a pastoral letter blaming Venezuela's desperate economic situation on the adoption of socialism as its economic system.  IBD covered that here on January 12.  IBD quotes from the letter as follows:

Venezuela's bishops Monday blamed "Marxist socialism" and "communism" by name for the horrors and chaos gripping their country, according to a story in El Universal.  The bishops said the long lines of people trying to buy food and other basic necessities and the constant rise in prices are the result of the government's decision to "impose a political-economic system of socialist, Marxist or communist," which is "totalitarian and centralist" and "undermines the freedom and rights of individuals and associations."

So what did the NYT have to say about the bishops' letter?  As far as I can determine, they haven't mentioned it yet.  Here is a list of all of their latest articles on Venezuela.  The most recent one was December 30.  It conceded that the decline in oil prices was a problem for Venezuela, but then said that the country was "in a better position to avoid a bust" than at the time of previous oil price declines.  Oh, on December 17 the Times published an op-ed by Diosdado Cabello, side-kick of Venezuelan strongman Maduro, criticizing the U.S. for imposing sanctions on Venezuela for human rights violations.  You literally cannot find out what is going on in Venezuela from reading the NYT.

Also on the editorial pages of this weekend's IBD we have "Green Energy Good For Rich, Pain For Poor," by Kathleen Hartnett-White.  In a world where new drilling technologies and "fracking" have suddenly generated a surplus of fossil fuel energy and sent oil and gas prices plunging, Europe continues to suffer human-created artificial shortages.  Hartnett-White quotes the German Association of Energy Consumers for the proposition that German electricity rates are now "two to three times higher than the U.S. average," all as part of an intentional program to appease the environmental gods by making Germans poorer.   And then this:

British officials celebrate the energy scarcity as the new normal, urging Britons to schedule laundry and work according to wind conditions and cloud cover.

Didn't centuries of human creativity and striving finally give us a world where we can now be largely independent of nature's whims to earn our living?  Yes, only to find ourselves with politicians desperate to undo it all.  Thankfully, here in the U.S., even as the EPA tries to impoverish the people, the frackers have them on the run, at least for the moment.

And then on the front page of IBD we have "Obama Mandates On Employers Now Exceed $5 Per Hour."  It seems that Obama's State of the Union address, scheduled for Tuesday, will propose yet another mandate on employers of low-income workers, this time for paid sick leave of 7 days per year.  This would come on top of the recently-imposed mandates of health insurance under Obamacare, plus increases in the minimum wage.  IBD calculates the value of the new sick leave mandate as approximately 30 cents per hour; and it calculates the total of the three mandates -- sick leave, health care, and increased minimum wage -- as coming to $5 per hour for low-wage workers.  

Might all these mandates have some impact on the employability of low-skill workers?  Well, the Bureau of Labor Statistics records an unemployment rate of 33.2% for African American teenagers in its most recent (December 2014) report.   That's up (although not by much) from 31.2% in Bush's last year of 2008, and in the interim has exceeded 40% at times.  Do you think our President might show a little concern about that?  None that I've seen -- I truly think he believes that all his mandates are completely free.  Funny, I also can't find any reporting from the New York Times on the African American teen unemployment rate for the whole time of Obama's presidency.   But something tells me it will become a big issue when a Republican President comes into office.